There Is a 30 Percent Chance That a New Product

question 53

Multiple Choice

There is a 30 percent chance that a new product development project will result in sales of $500,000 and a 70 percent chance that the project will result in sales of $100,000. What is the expected value of this project?

• A) $220,000
• B) $240,000
• C) $300,000
• D) $320,000
• E) $340,000

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Definitions:

Future Cash Flows

The projected income and expenditures that a company expects to generate over a forthcoming period.

Legal Documents

Official papers that indicate agreement to terms, rights, and responsibilities, enforceable by law.

Collateralized

Secured by an asset or property as a guarantee to repay a loan.

Amortized

The process of gradually reducing a debt through regular payments over time, which include both principal and interest components.